The World This Week July 8 - July 13, 2013

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  • 1. The World This Week July 8 – July 13, 2013
  • 2. Equity View: Last week, especially Thursday and Friday turned out to be good for the equity markets, largely on the back of clarifications by US Fed that they are in no hurry to taper off the ongoing Quantitative Easing (QE III). This was against the backdrop of a very sharp cool off in equity and risk asset markets across the globe last month when Fed announced its road map of tapering the QE III. They have clearly linked the tapering plan to the unemployment numbers and the growth numbers which continue to come out of the US. We believe that there will be some tapering of QE III which might happen towards the end of this year. It is difficult to figure out the quantum and the exact timing for the same. The US economy continues to do well from a macro economic perspective. There have been continuous additions of jobs which have surprised most of the analysts on the positive. As far as India is concerned, we had a pretty dismal set of numbers as far as IIP is concerned. We had a negative 1.6% number versus a positive 1.5% expectation which the markets generally had. The manufacturing outlook continues to be quite weak with a de-growth also coming up last month. We continue to believe that there is a need for continuous monetary easing for a sustainable bounce back in economic growth. We believe that when the RBI meets during the end of this month, we would see a rate cut irrespective of the fact that Rupee has weakened against the dollar significantly. We would expect a 25 bps cut in repo rate and may be a 25 bps cut in CRR rate when the RBI meets towards the end of the month. Also, in terms of the result season, we have seen a decent start to the earnings season so far. Infosys came up with a better than expected Dollar revenue growth and as a reaction to that the stock did jump quite significantly on Friday. This is a decent start as far as the IT sector earnings are concerned. And we expect most of the companies in the IT space would be able to deliver between 0 and 4% dollar revenue growth. In terms of the banking results so far, IndusInd bank came up with a pretty decent set of numbers with a 40% Y-o-Y growth. We believe that private sector banking names will continue to deliver good set of numbers with 15% - 20% flat growth for this quarter. We also expect Pharma and FMCG companies to also deliver 15% Y-o-Y growth on earnings. We expect that Pharma, IT, FMCG and Private Sector Banking names would continue to probably outperform their peers on the back of very strong earnings growth.
  • 3. News: DOMESTIC MACRO:  India's annual consumer price inflation picked up in June to 9.87 percent, after slowing for three straight months. It grew to 9.87 percent in June from 9.31 percent in May 2013.  Reflecting a persistent slowdown, India’s industrial production in May contracted by 1.6 per cent, lowest in the past 11 months, on account of poor show by the manufacturing and mining sectors.  India's trade deficit narrowed in June to $12.24 billion from $20.14 billion in May, as the growth in gold and silver imports slowed to 22.8 percent year-on-year at $2.45 billion in June. GLOBAL MACRO EURO  Greece secured a lifeline from the euro zone and the IMF of 6.8 billion Euro’s on Monday which spares Greece defaulting on debt in August.  Ratings agency Fitch downgraded France from the top AAA credit rating to AA+ on Friday, citing a heavier government debt load and poor prospects for growth United States  The U.S. government posted $117 billion budget surplus in June which was far more than expectations of $39.5 billion. This is one of the latest sign of rapidly improving public finances and also the improving economy. China  China's annual consumer inflation accelerated more than expected in June to 2.7 percent from 2.1percent in May 2013, partly because of the base effect. Indices: Date Sensex Midcap Auto Bankex CD CG FMCG HC IT Metals O&G Power Realty Teck 8/7/2013 19,325 5,989 10,655 12,900 6,158 9,135 6,895 9,079 6,246 7,543 8,743 1,614 1,486 3,699 9/7/2013 19,439 6,032 10,686 13,062 6,277 9,269 6,908 9,209 6,280 7,578 8,747 1,644 1,511 3,713 10/7/2013 19,294 6,008 10,526 12,981 6,399 9,178 6,864 9,220 6,321 7,509 8,588 1,628 1,491 3,723 11/7/2013 19,676 6,049 10,584 13,303 6,358 9,347 6,963 9,284 6,411 7,734 8,742 1,653 1,527 3,779 12/7/2013 19,958 6,048 10,572 13,376 6,298 9,529 6,948 9,385 6,826 7,747 8,800 1,665 1,518 3,973 3.28% 1.00% -0.79% 3.70% 2.27% 4.31% 0.76% 3.37% 9.28% 2.70% 0.65% 3.12% 2.16% 7.43%
  • 4. Commodities and Currency: Date USD GBP EURO YEN Crude (Rs. per BBL) Gold (Rs. Per 10gms) 08/07/2013 61.04 90.89 78.27 60.40 6500 26108 09/07/2013 60.07 89.90 77.43 59.36 6558 26210 10/07/2013 60.13 89.52 76.89 59.76 6477 26213 11/07/2013 59.64 90.13 77.98 60.40 6525 26727 12/07/2013 59.89 90.88 78.32 60.59 6425 26592 13/07/2013 6517 26760 1.92% Rupee Appreciated 0.01% Rupee Appreciated -0.06% Rupee Depreciated -0.31% Rupee Depreciated 0.26% 2.50% Debt: Tenor Gilt Yield in % (Friday) Change in bps (Week) 1-Year 7.62 -4 2-Year 7.73 6 5-Year 7.80 5 10-Year 7.52 2
  • 5. Satadru Mitra Varun Goel Jharna Agarwal Abbas Naheed Kinjal Doshi Disclaimer The information and views presented here are prepared by Karvy Private Wealth (a division of Karvy Stock Broking Limited) or other Karvy Group companies. The information contained herein is based on our analysis and upon sources that we consider reliable. We, however, do not vouch for the accuracy or the completeness thereof. This material is for personal information and we are not responsible for any loss incurred based upon it. The investments discussed or recommended here may not be suitable for all investors. Investors must make their own investment decisions based on their specific investment objectives and financial position and using such independent advice, as they believe necessary. While acting upon any information or analysis mentioned here, investors may please note that neither Karvy nor any person connected with any associated companies of Karvy accepts any liability arising from the use of this information and views mentioned here. The author, directors and other employees of Karvy and its affiliates may hold long or short positions in the above- mentioned companies from time to time. Every employee of Karvy and its associated companies are required to disclose their individual stock holdings and details of trades, if any, that they undertake. The team rendering corporate analysis and investment recommendations are restricted in purchasing/selling of shares or other securities till such a time this recommendation has either been displayed or has been forwarded to clients of Karvy. All employees are further restricted to place orders only through Karvy Stock Broking Ltd. The information given in this document on tax are for guidance only, and should not be construed as tax advice. Investors are advised to consult their respective tax advisers to understand the specific tax incidence applicable to them. We also expect significant changes in the tax laws once the new Direct Tax Code is in force – this could change the applicability and incidence of tax on investments Karvy Private Wealth (A division of Karvy Stock Broking Limited) operates from within India and is subject to Indian regulations. Karvy Stock Broking Ltd. is a SEBI registered stock broker, depository participant having its offices at: 702, Hallmark Business plaza, Sant Dnyaneshwar Marg, Bandra (East), off Bandra Kurla Complex, Mumbai 400 051 . (Registered office Address: Karvy Stock Broking Limited, “KARVY HOUSE”, 46, Avenue 4, Street No.1, Banjara Hills, Hyderabad 500 034) SEBI registration No’s:”NSE(CM):INB230770138, NSE(F&O): INF230770138, BSE: INB010770130, BSE(F&O): INF010770131,NCDEX(00236, NSE(CDS):INE230770138, NSDL – SEBI Registration No: IN-DP-NSDL-247-2005, CSDL-SEBI Registration No:IN-DP-CSDL-305-2005, PMS Registration No.: INP000001512”